Title Corporate social responsibility disclosures in internationalconstruction business: trends and prospects

Author(s) Lu, W; Ye, M; Flanagan, R; Ye, K

Citation Journal of Construction Engineering and Management, 2015

Issued Date 2015

URL http://hdl.handle.net/10722/214522

Rights

Journal of Construction Engineering and Management.Copyright © American Society of Civil Engineers.; This work islicensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

1

Corporate social responsibility disclosures in international construction business: 1

trends and prospects 2

Weisheng Lu1, Meng Ye2, Roger Flanagan3, and Kunhui Ye4 3

4

Abstract 5

There is increasing sophistication in corporate social responsibility (CSR) disclosures by 6

international construction companies (ICCs). Nevertheless, a systematic analysis of the trends 7

and prospects is yet to appear. This study fills that knowledge gap by providing an understanding 8

of the idiosyncrasies of CSR disclosure and by offering suggestions for future reporting exercises. 9

By examining the top fifty ICCs’ CSR/sustainability reports using content analysis, it found that 10

the more negative impacts a company may have, the more remedial strategies it will disclose in 11

a CSR report. ICCs from economically more developed countries maintain a high level of CSR 12

disclosure, while their counterparts from developing countries have caught up in this CSR cause. 13

As a way to improve the consistency and integrity of disclosed information, ICCs are 14

increasingly adopting CSR reporting guidance frameworks and using third-party assurances. 15

CSR disclosures present a high degree of uniformity while they also show nuanced and intriguing 16

diversity. This research helps understand comprehensively the trends of CSR disclosure in 17

international construction. It will help ICCs extrapolate their future CSR reporting exercises. 18

19

Keywords: Corporate social responsibility; Disclosure; International construction business; 20

Trends; Prospects; Content analysis 21

22

Introduction 23

Probably no industry offers as many paradoxes as construction corporate social responsibility 24

(CSR). On the one hand, the construction industry has an inherent social responsibility; it 25

materializes the built environment, which influences human health, economic activities, social 26

behavior as well as cultural identity and civic pride (Pearce 2003). The industry makes an 27

important contribution to the national economy, and provides a large number of jobs. It is a 28

hugely important industry in scope and scale; Flanagan and Jewell (2014) estimate global 29

1 Assistant Professor, Dept. of Real Estate and Construction, Faculty of Architecture, The University of Hong Kong,

Pokfulam, Hong Kong. Corresponding Author. Email: wilsonlu@hku.hk 2 PhD candidate, Dept. of Real Estate and Construction, Faculty of Architecture, The University of Hong Kong,

Pokfulam, Hong Kong 3 Professor, School of Construction Management and Economics, The University of Reading, Reading, UK 4 Professor, Faculty of Construction Management and Real Estate, Chongqing University, Chongqing, China.

2

construction output of US$6.8 trillion in 2013, which contributes between 8-10% to the annual 30

global gross domestic product. The industry provides employment for a substantial number of 31

the working population, e.g. around 30 million people in China are employed in construction 32

activities (National Bureau of Statistics of China 2014), 7.2 million in the USA (US Bureau of 33

Labor Statistics 2014), and 11 million in the European Union (EU Construction Statistics 2014). 34

On the other hand, construction is intrinsically ‘irresponsible’; it competes with the natural 35

environment and can have an adverse impact upon it, including land degradation, resource 36

depletion, waste generation, and various forms of pollution (Lu and Tam 2013; Zhao et al. 2012; 37

Ofori 1993). Buildings are responsible for more than 40 percent of global energy use and one 38

third of global greenhouse gas emissions (Rode et al. 2011). Corrupt practices are also an issue 39

with Transparency International suggesting that construction is one of the top three most corrupt 40

industries in the world. Competition in the construction industry is notoriously fierce. To survive, 41

companies sometimes operate at the expense of societal well-being; producing unsatisfactory 42

work, offering a harsh working environment, and maintaining poor occupational health and 43

safety standards. The conjunction of these paradoxes has brought CSR to the fore; it is now 44

growing in prominence as a core issue confronting the construction industry and its organizations 45

(Murray et al. 2008). 46

47

The above paradoxes relating to construction CSR are evident on an international scale. In recent 48

years, advanced technology, fast transportation, convenient communications, effective 49

knowledge transfer, integrated markets, and trade liberalization have all helped the construction 50

business traverse traditional national boundaries into the international arena (Lu et al. 2013). This 51

has formed a new business sector known as international construction, which is defined as the 52

part of construction business that is undertaken by companies working on projects outside their 53

home country (Ngowi et al. 2005). As an example of the scale of this business, Engineering 54

News-Record (ENR) statistics show that the ENR Top 250 International Contractors had 55

US$511.05 billion in contracting revenue in 2012 from projects outside their home countries, 56

along with US$813.55 billion in revenue from domestic projects (Tulacz 2013). With the 57

increasing globalization of construction business, the social responsibility of international 58

construction companies (ICCs) extends beyond their home country. For example, ICCs 59

undertaking construction business in a host country may also help build a hospital or school for 60

the benefit of the local community. The international construction business is a positive 61

development in terms of value creation, knowledge exchange, and resource configuration and 62

3

optimization. However, it is also criticized as being relatively irresponsible, given the embodied 63

energy and the carbon emissions associated with mobilizing resources across continents. CSR 64

has immediate material relevance for ICCs in their head and regional offices, at site locations 65

and through extensive supply chains. They increasingly face the effects of extreme poverty, 66

unacceptable working conditions, environmental degradation, systemic corruption or eruptions 67

of violence. In this environment, companies can choose one of two routes: uphold high standards, 68

or try to ignore the situation. Major ICCs will always take the former route. 69

70

A conspicuous trend in recent years is that ICCs, similar to companies in other business sectors 71

(e.g. mining, food, and investment), have published CSR disclosure reports to communicate their 72

CSR commitment and achievements to stakeholders. Unlike other businesses however, an 73

extensive literature review showed that, despite of CSR issues having been discussed in the 74

construction industry (e.g. Petrovic-Lazarevic 2008; Murray and Dainty 2008; Griffith 2011; 75

Bowen et al. 2007; Fox 2000; Liu et al. 2004; and Hill and Bowen 1997), no study has been 76

conducted to analyze ICCs’ reporting practices systematically. Jenkins and Yakovleva (2006) 77

explored the trends of CSR disclosures in the mining industry using a case study of the world’s 78

10 largest mining companies. Waller and Lanis (2009) analyzed CSR disclosure patterns in the 79

advertising sector, while Cuganesan et al. (2010) examined CSR disclosures within the 80

Australian food and beverage industry. Jones et al. (2010) investigated corporate approaches to 81

sustainability in the US engineering and construction industry. As elaborated later, sustainability 82

is not quite equal to CSR, although companies at times perceive them as similar. Zhao et al. 83

(2012) provided a set of indicators that can be used to implement CSR in the construction 84

industry and help companies methodically assess their CSR performance. There are pressures on 85

all companies to improve CSR reporting. For example, the Global Reporting Initiative (GRI) sets 86

out minimum requirements in key areas of CSR and companies sign up to report in accordance 87

with the requirements. The ISO26000 defines good practice and establishes standards. There is 88

legislation to ensure corruption does not occur, such as the UK Bribery Act 2010 and the US 89

Foreign Corrupt Practices Act 2004 and the US Anti-Corruption Act, and there are voluntary 90

codes on ethical behavior. However, the trends and prospects of CSR disclosures have not been 91

adequately articulated, despite the relevance of the two issues to an understanding of how CSR 92

is actually interpreted, practiced, and reported in international construction. 93

94

4

The aim of the study was to explore the trends and prospects in CSR reporting conducted by 95

ICCs. The research is of significant academic and practical value. Firstly, the trends can reveal 96

how the concept of CSR has been interpreted and practiced by ICCs. Jenkins and Yakovleva 97

(2006) noticed that companies show considerable variations in the maturity of the content and 98

style of their CSR reporting. The research will provide an ‘epistemological link’ (Zhao et al. 99

2012) between the concept of CSR and the real CSR strategies implemented by ICCs. Secondly, 100

exploring the trends of CSR disclosure will help reveal how CSR reporting is standardized. Zhao 101

et al. (2012, p. 279) discovered that there is little uniformity in CSR indicator frameworks, as 102

“these initiatives have evolved in a manner specific to the needs of the jurisdiction at that time 103

and place”. Standardization of CSR reporting is advocated as an effective way of communicating 104

CSR strategies and performance to stakeholders, and efforts to increase uniformity are evident 105

in various international standards in this area, e.g. ISO 26000 and Social Accountability 8000. 106

Thirdly, the trends to be identified provide useful references against which the idiosyncrasies of 107

CSR disclosures in the international construction business and other sectors can be compared. 108

This study is contextualized within international construction not only because it is an important 109

business sector received scant attention from researchers, but also because it provides a 110

contrasting lens through which CSR can be fruitfully investigated. Lastly, examining the 111

prospects of CSR disclosure will help ICCs extrapolate their future CSR reporting exercises. 112

Companies spend important resources on producing CSR reports; the research will help them to 113

use the resources more wisely and effectively in disclosing their CSR excellence. 114

115

The remainder of this paper is structured into four sections. Subsequent to this introductory 116

section, the theoretical foundation of this study and research hypotheses are elaborated in Section 117

2. Section 3 provides a detailed description of the research methods, whereby content analysis 118

of the CSR reports disclosed by ICCs is adopted. The fourth section presents the results, 119

discussion, and findings. Section 5 provides conclusions and limitation, and implications for 120

further research. 121

122

Theoretical foundation and research questions 123

Corporate Social Responsibility (CSR) disclosure is seen as “the process of providing 124

information designed to discharge social accountability. Typically this act would … be 125

undertaken by the accountable organization and thus might include information in the annual 126

report, special publications or even socially oriented advertising” (Gray et al. 1987, p. 4). The 127

5

most widely embraced theoretical perspectives explaining motivations for CSR reporting are 128

legitimacy theory and stakeholder theory. According to Waller and Lanis (2009), CSR disclosure 129

is a means of legitimization. Companies do not operate in a vacuum; rather, they impact and are 130

impacted upon by the socio-political context and the stakeholders. Here, stakeholders are any 131

individual, group, organization, member or system that affects or can be affected by an 132

organization’s actions (Freeman 1983). Stakeholder theory holds that stakeholders have different 133

interests in, and thus have different impacts on a corporation, either positive or negative, and the 134

corporation is seen to be responsible for meeting their interests even though they are outside of 135

the corporation (Freeman 1983). There is a ‘social contract’ between a company and society 136

formed by various stakeholders (Deegan 2002; Mathews 1993; Patten 1992). Bound by this 137

contract, firms agree to perform various socially desired actions in return for societal approval 138

of their objectives and other rewards, and this ultimately guarantees their continued existence 139

(Deegan 2002; Brown and Deegan 1998; Guthrie and Parker 1989). In this sense, CSR disclosure 140

is a method by which management can interact with society to influence society’s perceptions of 141

their organization (Deegan 2002), and discharge their obligations (Farook et al. 2011; Campbell 142

2000). In addition to achieving legitimacy, there are other motivations for a company to engage 143

in CSR disclosure. They are: (1) enhancing corporate reputation and brand value; (2) gaining a 144

competitive advantage; (3) signaling superior competitiveness; (4) allowing comparison with 145

and benchmarking against competitors; (5) increasing transparency and accountability within the 146

company; and (6) establishing and supporting employee motivation as well as internal 147

information and control processes (Herzig and Schaltegger 2006). To this can be added the 148

opportunity to attract new customers, to attract new investors, to increase trust, to influence 149

government policy makers, and to establish a reputation of being a socially responsible company. 150

151

Nevertheless, there is little consensus on what should be included in CSR disclosures. The terms 152

of the ‘social contract’, or what CSR entails, cannot be known with any precision (Farook et al. 153

2011). This is further exacerbated by the confusion caused by terminology in CSR. Dahlsrud 154

(2008) identified 37 definitions of CSR and found that the existing definitions are to a large 155

degree congruent, but Carroll and Shabana (2010), contended that this figure is an 156

underestimation, as many academically derived definitional constructs were not included in 157

Dahlsrud’s research. The UN Global Compact (2013) suggests the terms ‘corporate sustainability’ 158

and ‘corporate responsibility’ are interchangeable; whereas the term ‘corporate social 159

responsibility’ is used to reflect an organization's recognition of its social responsibility. Lu et al. 160

6

(2014) reported that there is no single, agreed definition of the term CSR. This has resulted in a 161

diversity of CSR strategies and reporting amongst companies. Managers have different 162

perceptions about these terms, and their CSR disclosures will vary (Waller and Lanis 2009). 163

164

Cuganesan et al. (2010) pointed out that one issue of increasing importance is the need to 165

recognize industry specificity when formulating and assessing CSR disclosure. This is in line 166

with Windsor (2001), which argued that how CSR is understood and perceived still largely 167

depends on the business context and the managerial dispositions of each corporation. This also 168

resonates with studies that have identified the nature of a company’s industry as a factor affecting 169

CSR disclosure (e.g. Cho and Patten 2007; Yongvanich and Guthrie 2005; Halme and Huse 1997; 170

Roberts 1992). “Industries exhibit special uniqueness in that the internal competencies or 171

external pressures inherent in the industry create a ‘specialization’ of social interests” (Griffin 172

and Mahon 1997, p. 10). It is to be expected that the heterogeneities of the international 173

construction business, the aforementioned paradoxes in particular, will lead to idiosyncrasies in 174

CSR reporting. 175

176

According to one theoretical perspective, higher levels of CSR disclosure occur concurrently 177

with increased focus on the problems a company may cause, or the threats of litigation and fines 178

it may face (Cho and Patten 2007; Yongvanich and Guthrie 2005). In other words, the more 179

‘irresponsible’ impacts a company may have, the more remedial strategies it will disclose in a 180

CSR report. It has been well articulated that international construction witnesses many CSR 181

paradoxes, e.g. it providing the built environment by competing against the natural environment, 182

and it causing many nuisance to the community. An immediate relevant research question is “Do 183

ICCs disclose more about their commitment to CSR remedial strategies such as energy saving, 184

carbon emission reduction, community care, transparency, occupational health and safety 185

(OHS), logistic and supply chain management, transparency, and anti-competitive behavior 186

(Q1)?”Answering this research question is of both theoretical and practical significance. It 187

enables confirmation whether legitimacy theory and stakeholder theory can be applied to explain 188

the motivation for CSR disclosure and reveal the issues that should be entailed in the ‘social 189

contract’. 190

191

In view of growing global concerns over CSR, it is with no doubt that ICCs will increase their 192

CSR disclosure level, which reflects the extent to which ICCs have reported their CSR strategies 193

7

and consequently, the performance achieved. Previous studies (e.g. Kolk et al. 2001; Maignan 194

and Ralston 2002) have suggested that there are country-specific and industry-specific 195

differences in the extent of CSR reporting. The industry-specific differences and their impact on 196

CSR disclosures, as described above, are to be examined by linking them to the heterogeneities 197

of international construction, in particular the CSR paradoxes. Given that companies in 198

developed countries have been striving for some time to meet escalating legal requirements, there 199

is a view that developing countries have more potential in terms of introducing CSR strategies 200

(Lu et al. 2014). The contemporary CSR movement is primarily pushed by the civil society in 201

more economically developed countries, but the movement has great impact on less developed 202

countries in the age of globalization. It is thus posited that ICCs from more economically 203

developed countries will maintain a high level of CSR disclosure, while their counterparts from 204

less developed countries will try to improve their CSR disclosure levels. An immediate research 205

question is “Do ICCs from more economically developed countries maintain a higher level of 206

CSR disclosure than their counterparts from less developed countries? (Q2)” 207

208

In parallel with these differing reporting levels, there has been found no uniformity in method of 209

CSR reporting. International organizations such as the ISO, the World Resources Institute and 210

the GRI have therefore started developing frameworks to standardize CSR reporting. The move 211

towards standardization represents not only a convergence in the language and transparency of 212

CSR, but also convergence of CSR into an agreed concept and a credible form of self-regulatory 213

governance over issues that are not externally regulated (Chiu 2010). The GRI, for example, aims 214

to develop a voluntary reporting framework that will elevate sustainability reporting practices to 215

a level equivalent to that of financial reporting in rigor, comparability, auditability and general 216

acceptance (Willis 2003). It has recently published the Construction & Real Estate Sector 217

Supplement (CRESS) with the aim of providing sustainability performance indicators and 218

disclosures that are important or unique to the sector. This research is conducted at an opportune 219

time, as it is straddling a period that is before and after the publication of an international 220

construction relevant CSR reporting guidance, i.e., CRESS. It would be interesting to find out 221

“Are there more ICCs reporting their CSR performance in accordance with the GRI reporting 222

guidelines and using more third-party assurance to enhance the credibility of the disclosed 223

information? (Q3)” 224

225

8

Standardization unnecessarily means no nuanced and intriguing diversity allowed in CSR 226

reporting undertaken by ICCs. The ‘social contract’ between a corporation and society, which in 227

turn influences CSR disclosures, depends not only on industry specificity, but also on countries. 228

Other than categorizing countries into developed and developing countries in Q2, it needs to 229

further examine countries with different cultures and institutions. The international construction 230

business is subject to many onerous regulatory and cultural differences, such as controls on land 231

use; building regulations and technical requirements; building permits and inspection, and 232

environmental regulations. In face of the culture (Kogut and Singh 1988; Tijhuis and Fellows 233

2011) or institutional distance (Bae and Salomon 2010; Lu et al. 2013) between the home and 234

host countries, ICCs would not be able to adopt ‘one-size-fit-all’ CSR strategies. For example, 235

the culture distance or institutional distance may bring tension and force ICCs to deliberate CSR 236

strategies in host countries, e.g. to reduce poverty, or to improve community health. The cultural 237

characteristics of a home country may lead to interesting nuanced difference in CSR disclosures 238

although standardization is advocated. A natural thinking is that they may tailor their CSR 239

strategies with respect to the cultural or institutional profile of host countries. It is thus interesting 240

to find out “What are the idiosyncrasies in CSR reporting impacted by cultural or institutional 241

difference? (Q4)” 242

243

It is expected that, by examining the above four research questions retrospectively, the prospects 244

of CSR disclosures by ICCs can be regressed. To understand the trends of CSR disclosure as 245

stated in CSR reports is important, while the more meaningful research inquiry is to considering 246

their impact on the future, although it is often risk-prone to extrapolate into the future. To 247

maintain the consistency of presentation, the sixth research question is proposed: “What are the 248

possible prospects of CSR disclosures by ICCs? (Q5)”. 249

250

Research methods 251

The sample of international construction companies (ICCs) was determined by reference to the 252

top international contractors (TIC) lists compiled by Engineering News-Record (ENR), an US-253

based construction, building and engineering-oriented magazine. Since the late 1970s, ENR has 254

ranked the 225 (250 in recent years) largest ICCs based on general construction contracting 255

revenues generated from projects outside each firm's respective home country. The top 50 on the 256

2013 ENR TIC list were selected as the sample (See Table 1). Among the sample ICCs, twenty-257

one companies are from Europe, twenty from Asia and Australia, eight from the USA, and one 258

9

from Brazil. It might not be entirely valid to identify the ‘nationality’ of a company, owing to 259

frequent mergers and acquisitions across country borders in the international construction 260

business. For example, the No. 1 company by the name of ‘Grupo ACS’ in Spain is the majority 261

shareholder in the second highest company named ‘Hochtief AG’ from Germany; and meanwhile 262

these two companies are the principal shareholders of ‘Leighton Holding’ from Australia. 263

Nationalities are thus better seen as the ‘national origins’ of a company. The ICCs’ main line of 264

business is based on ENR 2013 (Tulacz 2013), which states that a business taking up 20% or 265

above of the company’s total revenue is deemed to be the company’s main line of business. 266

267

Table 1. Profiles of the top 50 international construction companies in the selected sample 268

Rank* Name National

origin

Main

business

lines#

Rank* Name National

origin

Main

business

lines#

1 Grupo ACS Spain GB, TA 26 Daelim S. Korea IP

2 Hochtief Germany GB, TA 27 Salini Italy TA, WS

3 Bechtel USA IP, TA 28 GS E&C S. Korea IP

4 Vinci France TA 29 KBR USA TA

5 Flour USA IP 30 Abeinsa Spain PO

6 Strabag Austria TA 31 Leighton Australia GB, IP,

TA

7 Bouygues France TA 32 JGC Japan IP

8 Saipem Italy IP 33 Lend Lease Australia GB

9 Skanska Sweden GB, TA 34 CREC China TA, GB

10 CCCC China TA 35 SK E&C S. Korea IP

11 Technip France IP 36 Samsung C&T S. Korea PO

12 Odebrecht

Organization

Brazil TA, IP 37 CB&I U.S.A. IP

13 Samsung

Engineering

S. Korea IP 38 Tecnicas Reunidas Spain IP

14 FCC Spain GB, TA 39 Kiewit U.S.A. IP, PO

15 Hyundai

E&C

S. Korea PO, IP 40 Daewoo E&C S. Korea IP, PO

16 Bilfinger Germany IP 41 Danieli & C Italy IP

17 Balfour

Beatty

UK GB, TA 42 McDermott U.S.A. IP

18 Petrofac UK IP 43 CITIC China GB

19 Royal BAM The

Netherlands

GB, TA 44 Foster Wheeler U.S.A. IP, PO

20 Sinohydro China PO, TA 45 Isolux Corsan Spain PO, TA

21 CCG Greece IP, TA 46 POSCO S. Korea IP, PO

22 PCL USA GB, IP 47 Obayashi Japan GB, TA

23 OHL Spain TA 48 Larsen India IP, PO

24 CSCEC China GB, TA 49 Acciona Spain TA, GB

10

25 China

Machinery

China PO, IP 50 Kajima Japan GB, MA

* The ranks are based on the year 2013. 269

# GB=General Building; MA=Manufacturing; PO=Power; WS=Water Supply; SW=Sewer/Waste; 270

IP=Industrial/Petroleum; TA=Transportation; HW=Hazardous Waste; and TE=Telecom. 271

272

CSR reports of the sample ICCs over the past five years (2008–2012) were retrieved from their 273

websites. The TIC 50 is not a static group; they will change each year on the list dependent upon 274

performance; some firms even drop off the lists in certain years. It is common practice for ICCs 275

to communicate their CSR strategy and performance through the Internet as a major channel with 276

some having developed a themed website for this purpose. Companies published either 277

sustainable development/sustainability reports or CSR reports, which is not particularly 278

unexpected given that there is no clear boundary between the two concepts (Ebner and 279

Baumgartner 2006). Two ICCs named ‘JGC’ and ‘SK E&C’ publish environment reports to 280

show their CSR performances with regard to the environment. A total of 155 CSR/sustainability 281

reports were collected for analysis, putting aside the question of whether the two concepts are 282

one and the same. 283

284

The CSR/sustainability reports were coded using content analysis; an approach adopted by many 285

researchers to analyze CSR reporting (e.g. Roca and Searcy 2012; Jenkins and Yakovleva 2006; 286

Wilmshurst and Frost 2000). Content analysis is a systematic, replicable technique for 287

compressing many words of text into fewer content categories based on explicit rules of coding 288

(Krippendorff 2012; Stemler 2001). It is a continuous and iterative process characterized by two 289

key stages, the first of which requires managing the data, and the second stage involving making 290

sense of the evidence through descriptive or explanatory accounts (Burden and Roodt 2007). 291

292

An instrument as shown in Table 2 has been developed as the protocol for decoding CSR reports. 293

The instrument includes indicators, which are not specifically included in the CRESS G3.1 but 294

are frequently mentioned in reports, such as Information Transparency (IT). There are six groups 295

with 23 sub-categories of performance indicators in total listed in Table 2: (1) EN- Environment 296

(5 sub-categories); (2) SO- Society (4 sub-categories); (3) LA- Labor Practices and Human 297

Rights (6 sub-categories); (4) PR- Product Responsibility (2 sub-categories); (5) IT- Information 298

Transparency (3 sub-categories); and (6) EI- Economic Indicators (3 sub-categories). 299

300

301

11

Table 2. The protocol for decoding CSR reports 302

Codes Categories Codes Sub-categories Stakeholders related

EN Environment EN1 Materials The Public

EN2 Energy The Public

EN3 Water The Public

EN4 Biodiversity The Public

EN5 Emissions, effluents and waste The Public

SO Society SO1 Community Local Communities

SO2 Code of Conduct/ Ethic Local Communities

SO3 Anti-Corruption Local Communities

SO4 Anti-Competitive Behavior Competitors

LA Labor Practices and

Human Rights LA1

Diversity and Equal

Opportunity Employees

LA2 Training and Education Employees

LA3 Occupational Health and Safety Employees

LA4* Work- Life balance Employees

LA5* Salary policy/ Benefits Employees

LA6* Employee Feedback Employees

PR Product Responsibility PR1

Customer Health and Safety

/Quality

Clients and future

users

PR2 Product and Service Labeling Clients and future

users

IT* Information

Transparency IT1* Media The Public

IT2* Intra-corporate Employees

IT3* Reported to markets Shareholders

EI Economic Indicators EI1 Economic performance Shareholders

EI2 Market presence Suppliers and Local

Communities

EI3 Indirect economic impacts Local Communities

*Aspects summarized from the corporate reports 303

304

The 23 CSR performance indicators in each of the 155 SD/CSR reports were manually coded 305

into a MS Excel file. If a report disclosed a certain indicator, it was noted with a “√” in the Excel 306

file; otherwise, the indicator was marked with a “-“. This laborious coding process produced a 307

very large table (called Table A), a part of which is shown in Table 3. The table describes the 308

CSR performance reported by ICCs over the past five years. The process was also with the 309

assistance of qualitative data analysis software “Leximancer” that automatically identified high 310

level concepts in the documents. To reduce the inherent subjectivity and potential variance, a 311

second coder repeated the process independently and produced another table (called Table B). 312

To ensure the consistency of the works from the two independent coders, Cohen's Kappa 313

coefficient could have been applied, but a more straightforward method was adopted. The two 314

excel tables, having an identical structure, were subtracted from each other, i.e. Table A-Table 315

12

B. Those cells/indicators scoring a result other than “0” meant an inconsistency between the two 316

coders. The reports were then analyzed again to determine whether the indicator in question had 317

in fact been reported. This process was repeated until all the cells scored a “0”, meaning that full 318

agreement between the two coders had been achieved. The finalized Excel table, formed an 319

information hub for data analyses. 320

321

13

Table 3. An excerpt of the data table generated from the content analyses of the CSR reports 322

323

324

Typles of Report EN1 EN2 EN3 EN4 EN5 SO1 SO2 SO3 SO4

Ranking Name Country Materials Energy Water Biodiversity

Emissions,

effluents and

waste

Community

Code of

Conduct/

ethic

Anti-

Corruptio

n

Anti-

Competitive

Behaviour

2008Corporate Respons ibi l i ty/ Annual

Report√ √ √ √ √ √ √ — —

2009Corporate Respons ibi l i ty/ Annual

Report√ √ √ √ √ √ √ — —

2010Corporate Respons ibi l i ty/ Annual

Report√ √ √ √ √ √ √ — —

2011Corporate Respons ibi l i ty/ Annual

Report√ √ √ √ √ √ √ — —

2012Corporate Respons ibi l i ty/ Annual

Report√ √ √ √ √ √ √ √ √

2009 Sustainability Report √ √ √ √ √ √ √ √ —

2011 Sustainability Report √ √ √ √ √ √ √ √ —

2012 Sustainability Report √ √ √ √ √ √ √ √ √

2008 The Bechtel Report √ — — — √ — — — —

2009 The Bechtel Report — — — — √ — — — —

2010 The Bechtel Report — — — — — √ √ — —

2011 The Bechtel Report √ √ — — √ √ √ — —

2012 The Bechtel Report √ √ — — √ √ √ — —

2008 Annual Report — — — — √ √ — — —

2009 Annual Report — √ √ √ √ √ √ — —

2010 Annual Report — √ — √ √ √ √ — —

2011 Annual Report — √ — √ √ √ √ — —

2012 Annual Report — — — √ √ √ √ — —

3 Bechtel San Francisco,U.S.A.

4 VinciRueil-

Malmaison,France

1 Grupo ACS Madrid, Spain

2HOCHTIEF AG (Hochtief

Aktiengesellschaft )Essen, Germany

Company

Years

EN-Environmental Performance Indicators SO-Society

14

Based on the analyses of the quantitative data in the table, CSR reports were used as qualitative 325

data to deepen the understanding of CSR strategies and their performance reported by the ICCs. 326

The authors have conducted a few informal discussions with executives of top ICCs different 327

occasions over the past years to solicit their insights on CSR. This was used as qualitative data 328

to be triangulated with the quantitative and qualitative data decoded from the CSR reports. The 329

data will be analyzed and blended together in this paper to ensure an uninterrupted reading 330

journey in understanding the trends and prospects of CSR disclosures by ICCs. 331

332

Results, analysis and discussion 333

Profile disclosure 334

Table 4 shows that CSR disclosure reports have a diverse range of titles. They may be referred 335

to as CSR reports (e.g. CCCC), corporate responsibility reports (e.g. Grupo ACS), sustainability 336

reports (e.g. Fluor Corporation), environment reports (e.g. JGC), annual reports (e.g. Vinci), or 337

named after the company name (e.g. the Bechtel reports). Some of the ICCs (e.g. Skanska AB) 338

published part of their annual report on their CSR/sustainability disclosure website. The diversity 339

of these titles reflects the absence of a single and agreed definition of the term CSR (Carroll and 340

Shabana 2010), and the blurred boundary between sustainability and CSR (Ebner and 341

Baumgartner 2006). It was ascertained that all of them do disclose CSR/sustainability strategies 342

and performance, and can thus be treated as a homogeneous group. 343

344

Table 4. Types of reports used by ICCs for CSR disclosure 345

Years

Types of Reports Total reports

(?/50) CSR

reports

Sustainability

reports

Environment

reports

Annual

reports

Incomplete

report/

website

2008 6 9 0 4 1 20

2009 7 12 2 3 1 25

2010 6 16 2 5 1 30

2011 8 15 2 6 2 33

2012 9 19 2 7 10 47

346

The last column of Table 4 shows that the total number of CSR reports disclosed by ICCs has 347

increased over the period, i.e. five years from 2008 to 2012 inclusive. In 2012, 47 out of the 50 348

sample ICCs published a CSR report or its equivalent. CSR reporting, while not mandatory in 349

most countries, has been adopted by many large ICCs around the world. This trend may reflect 350

15

on one hand stakeholders’ increasing influence on the operation of corporations and, on the other 351

hand corporations are becoming more willing to use CSR disclosure as a means of interacting 352

with society. 353

354

Q1: Do ICCs disclose more about their commitment to CSR remedial strategies? 355

Based on the basic data in Table 3, specific types of CSR strategy and performance disclosure 356

were analyzed. This involved counting each “√” of a specific indicator as 1 point across all the 357

sample reports, and plotting the total points in the spider diagram as shown in Fig. 1. The total 358

points of a specific indicator reflect the number of companies that have reported the indicator in 359

a given year. The diagram shows that EN5 (Emissions, effluents and waste), SO1 (Community), 360

and LA3 (Occupational Health and Safety) are the three most frequently reported CSR indicators. 361

All the reports in 2011(33/33) and 2012(47/47) included these three indicators, and in the years 362

from 2008 to 2010, over 90% of the companies elaborated these three strategies in their reports. 363

The analytical results support the assumption that the more negative impacts a company may 364

cause, the more remedial strategies it will disclose in a CSR report. The indicators with a long 365

axis in the spider diagram are all problematic aspects that ICCs can improve upon for the benefit 366

of society, or their legitimacy of existence as a company will be challenged. The CSR reports 367

have frequently mentioned their commitment to stakeholders such as employees, clients and 368

future users, shareholders, suppliers, and particularly, local community and the general public 369

(Table 2), even though the latter are outside of the corporation. Legitimacy theory and 370

stakeholder theory do hold in ICCs’ CSR reporting practice. 371

372

16

373

Fig. 1. CSR performance indicators disclosed by ICCs (2008-2012) 374

375

Construction is a major contributor to environmental degradation, e.g., by generating greenhouse 376

gas emissions, discharged water, and waste. The ICCs reported their CSR policies and 377

technologies, for dealing with these issues. Construction also has a significant impact on the local 378

community and so the ICCs devise their CSR commitment to deal with the nuisances and help 379

the community. Construction is notorious for the hardship of its working environment: many 380

view it as a 3D (dangerous, dirty, and demanding) industry, and OHS incidents are sometimes 381

reported. The ICCs in the sample disclosed CSR strategies to address these issues, which include 382

ensuring that employees have adequate training in the safe use of all plant, machinery, substances, 383

and other OHS issues. EN2 (Energy), SO2 (Code of Conduct/Ethic) and LA2 (Training and 384

Education) also attracted much attention in the CSR disclosures. It can be seen from Fig. 1 that 385

80%–90% of the sample companies reported these indicators in the past five years. Table 5 lists 386

examples of the detailed CSR strategies and performance disclosure on the above frequently 387

reported aspects. For example, Vinci disclosed quantified performance in reducing emissions, 388

effluents and waste. Skanska highlighted it being the world’s largest investment in OHS 389

implemented by a single company. 390

391

392

05

101520253035404550

EN1 MaterialsEN2 Energy

EN3 Water

EN4 Biodiversity

EN5 Emissions, effluents and…

SO1 Community

SO2 Code of Conduct/ ethic

SO3 Anti-Corruption

SO4 Anti-Competitive…

LA1 Diversity and Equal…

LA2 Training and EducationLA3 Occupational Health…LA4 Work- Life balance

LA5 Salary policy/ benefits

LA6 Employee feedback

PR1 Customer Health and…

PR2 Product and Service…

IT1 Media

IT2 Intra-corporate

IT3 Reported to markets

EI1 Economic perfomance

EI2 Market presence

EI3 Indirect economic impacts

2012 2011 2010 2009 2008

17

Table 5 Examples of CSR strategies and performance frequently reported by 393

international construction companies 394

Company CSR strategies and performance

Emissions, effluents and waste (EN5)

Vinci Vinci has been measuring its GHG emissions according to the ISO 14064 standard

across its worldwide scope since 2007. Its greenhouse gas emissions amounted to 62

tons of CO2 per million euros of revenue in 2012, which constitutes a 13% fall from

2009. In the annual Carbon Disclosure Project review, Vinci obtained a score of

80/C, up five points from 2011.

Fluor Fluor established its global carbon footprint baseline in 2006 for its offices, fleets at

those offices and air travel, so that it can effectively manage operations in an

environmentally responsible manner.

Communities (SO1)

Hochtief The company focuses its activities on two main issues: educating and promoting

young talent, and shaping the maintaining living spaces.

Bechtel Partnerships have been formed with five nonprofit organizations (NGOs) to enhance

the company’s positive impact in communities. Bechtel volunteers engage in the

global work of these partners, focusing on the education of children, particularly in

the areas of science, technology, engineering, and mathematics.

Strabag

SE

The Concordia aid organization has been caring for abandoned children in Romania,

Moldova and Bulgaria. The group also cares for older people in need.

OHS (LA3)

Skanska For the eighth consecutive year, a Skanska Safety Week has been organized, which

according to Skanska (2014) is the world’s largest investment in occupational health

and safety implemented by a single company.

GS GS has established formal joint management-worker health and safety committees in

which a certain percentage of the total workforce must be represented.

CCCC CCCC protects establishes a sound labor protection mechanism and systems on

employees’ regular annual physical examination and special examination of special

trades and harmful types of work.

Energy (EN2), Code of Conduct/Ethic (SO2), and Training and Education (LA2)

Saipem Saipem installed 49 solar water heater panels on Saipem Karimun base in Indonesia,

which will help save 97,000kWh energy and reduce CO2 emissions by approximately

20 tons.

Balfour

Beatty

To conduct business with integrity, Balfour Beatty requires its employees to take an

online Code of Conduct training module. The company has introduced an Ethics

Helpline and opened other channels so that employees and others can report behavior

that is or is suspected to be unethical or in breach of the Code of Conduct.

Grupo

ACS

The company has programmes for continuous training and skills development, aimed

at meeting employees’ training needs for correct execution of their work and for

personal and professional development.

395

18

A similar phenomenon that companies disclose more about their strategies that can help remedy 396

the negative impacts they may cause can also be witnessed in other industries. For example, in 397

the beverage industry, Starbucks and Coca-Cola promote fair trade of coffee beans and cocoa 398

beans respectively (Argenti 2004), while the food industry mainly focuses on product 399

responsibility (Cuganesan et al. 2010). The finance industry mainly concentrates on socially 400

responsible investing (SRI) (Hillman and Keim 2001; Renneboog et al. 2008). Although there is 401

perpetual concern that investing in CSR will jeopardize corporate financial performance (CFP) 402

(Lu et al. 2014; Margolis and Walsh 2001; Orlitzky et al. 2003), CSR strategies that are 403

embedded in the companies’ business lines may create a ‘win-win’ CSR/CFP situation. Notably, 404

some of the ICCs highlighted construction as a direct contributor to CSR. CCCC sees its 405

transportation infrastructure business as playing a positive role in promoting regional economic 406

development, providing more employment opportunities, and encouraging the development of 407

relevant materials and equipment supply. 408

409

Nevertheless, this research discovered findings that are against our previous assumption about 410

CSR disclosures - some of the reported CSR strategies, such as providing training for the local 411

community, appear not to be linked to the ICCs’ construction business. Although education is 412

recognized as a universal value, comments from top ICC executives implies that this CSR 413

strategy, similar to philanthropy, is seen as an indirect strategy bringing immediate benefit while 414

causing ‘less trouble’ to the company at a later stage. Moreover, the theoretic perspective that 415

companies tend to disclose more about their commitment to CSR remedial strategies does not 416

hold in the aspects coded SO3 (Anti-Corruption), SO4 (Anti-Competitive Behavior), LA4 417

(Work-life balance), and IT2 (Intra-corporate Information Transparency). For example, although 418

corruption issues have not diminished in recent years, there have been fewer disclosures of 419

corruption issues in ICCs’ CSR reports, suggesting this is a sensitive issue that ICCs do not wish 420

to be publically discussed. This accords with the view of O’Donovan (2002) that CSR disclosures 421

vary according to the intent of the discloser. 422

423

Q2: Do ICCs from more economically developed countries maintain a higher level of CSR 424

disclosure than their counterparts from less developed countries? 425

Based on the basic data in Table 3, CSR disclosure levels were analyzed. Each “√” for a specific 426

indicator in a report was counted as 1 point; the total points for a report in a specific year could 427

then be viewed as the company’s CSR disclosure level, i.e. the extent to which an ICC reported 428

19

their CSR performance. Whereas previous studies (e.g. Cuganesan et al. 2010; Jenkins and 429

Yakovleva 2006) used number of pages as proxies for disclosure levels, appearance of the 430

indicators is believed to be more helpful for probing into CSR disclosure. Since there are 23 431

indicators (see Table 2), the maximum disclosure level a company can possess is 23. Table 6 and 432

Fig. 2 show the total disclosure levels contributed by the ICCs as a whole on a yearly basis, 433

showing both the number of reports and the reporting levels increasing. ICCs as a whole have 434

increasingly enriched the content of their CSR disclosure, evidenced by the increasing average 435

disclosure levels per report and the converging standard deviation. Table 7 shows the annual 436

numbers of reports by region from 2008 to 2012, from which it can be clearly seen that ICCs in 437

European countries pay more attention to the disclosure of CSR activities while Asian companies 438

are catching up in this regard. 439

440

Table 6. ICCs’ CSR disclosure levels on a yearly basis 441

2008 2009 2010 2011 2012

No. of reports 20 25 30 33 47

Potential range of

disclosure levels* [0-460] [0-575] [0-690] [0-759] [0-1081]

Total no. of disclosures 289 344 449 540 722

Average disclosure

level per report 14.45 13.76 14.97 16.36 15.36

Standard deviation 5.40 5.46 4.67 4.11 4.54

* Potential range of disclosure level= No. of reports*23, since the maximum disclosure level for each 442

report is 23. 443

444

20

445

Fig. 2. CSR disclosure levels by ICCs (2008-2012) 446

447

Table 7. The numbers of reports disclosed by ICCs from different countries or regions 448

Years

Countries/ Regions Total Reports

(?/50) Europe a

(21)c

Asia and Australia b

(20) c

U.S.A

(8) c

Brazil

(1) c

2008 9 8 2 1 20

2009 11 12 2 0 25

2010 13 13 3 1 30

2011 14 16 2 1 33

2012 21 18 7 1 47

a. Reports from companies in Spain, France, Germany, Italy, U.K, Sweden, Netherlands, Greece and Austria are 449

included in this column. 450

b. Twenty ICCs from four Asian countries (China, South Korea, Japan and India) and Australia were ranked as top 451

50 by ENR in 2013. 452

c. The numbers in the brackets are the numbers of ICCs from that country/region. 453

454

To further examine the impact of country-specific differences on the extent of CSR reports, the 455

companies have been arranged into four groups according to different regions divided by ENR: 456

(1) Europe; (2) Asia and Australia; (3) the USA; and (4) Latin America (Brazil). Fig. 3 illustrates 457

the annual CSR disclosure levels by the different regions, and Figs. 4, 5, and 6 illustrates the 458

levels at individual company level. European ICCs all have high levels of CSR disclosure, which 459

they have maintained over the past five years. Through this disclosure, they are seemingly more 460

willing to interact with society, making themselves more ‘caring’ companies. ACS and Abeinsa 461

460

575

690759

1081

289344

449

540

722

14.45 13.76

14.97

16.36

15.36

12

12.5

13

13.5

14

14.5

15

15.5

16

16.5

17

0

200

400

600

800

1000

1200

2008 2009 2010 2011 2012

Potential range of disclosure levels Total no. of disclosures

Average disclosure level per report

21

from Spain, and Balfour Beatty from the UK are the three top ICCs which possess highest CSR 462

disclosures levels. Asian and Brazilian ICCs are catching up and increasing their CSR disclosure 463

levels to an extent that is similar to developed world ICCs. Larsen from India, Kajima from Japan, 464

and CREC from China are the three top Asian ICCs having high CSR disclosure levels. With 465

globalization, and in view of the heightening concerns surrounding the international construction 466

business, ICCs from non-Western countries have joined the CSR cause. For example, Chinese 467

ICCs, irrespective of the fact that they are emerging as amongst the strongest contenders in the 468

global construction market (Lu et al. 2009; Low and Jiang 2003), have made significant strides 469

in reporting CSR since 2010. Partly, this is due to pressure from the Chinese government to make 470

their State Owned Enterprises more socially responsible, and partly a recognition that socially 471

responsible investment influences the share price of a business, although the structure of the 472

Chinese capital market poses serious questions for the SRI development in China. Chinese 473

investors have not yet developed an appetite for SRI. The Chinese securities market has been 474

famous for excessive speculation. Indigenous Chinese investors are obsessed with short-term 475

profits, rather than long-term investment (Lin 2010). In the face of the criticism, for example, 476

the US Secretary of State Hillary Clinton warning of a creeping “new colonialism” in Africa 477

(Lee 2011), Chinese ICCs have started to publish CSR reports in English. Strangely, the large 478

group of American ICCs seems to publish CSR reports only on an ad hoc basis. Only Flour and 479

Bechtel disclose their CSR performance regularly (See Fig. 6). 480

481

Fig. 3 CSR disclosure levels per annum by ICCs from different regions (2008-2012) 482

483

0.00

5.00

10.00

15.00

20.00

0

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012Europe SUM Asia and Australia SUM U.S.A. SUM Brazil SUM

Europe MEAN Asia and Australia MEAN U.S.A. MEAN Brazil MEAN

22

Fig. 4. CSR disclosure levels per annum by European ICCs (2008-2012) 484

485

486

Fig. 5. CSR disclosure levels per annum by all Asian and Australian ICCs (2008-2012) 487

488

489

490

0 20 40 60 80 100 120

CCCCSinohydro

CSCECChina Machinery

CRECCITIC

SamsungHyundaiDaelim

GSSK

Samsung C&TDaewoo E&C

POSCOJGC

ObayashiKajimaLarsen

LeightonLend Lease

Asia and Australia

2008 2009 2010 2011 2012

China

Japan

S. Korea

India

Australia

0 20 40 60 80 100 120

ACS

FCC

OHL

Abeinsa

Tecnicas Reunidas

Isolux Corsan

Acciona

Hochtief

Bilfinger

Strabag

Vinci

Bouygues

Technip

Saipem

Salini

Danieli & C

Skanska

Royal BAM

Consolidated contractors

Balfour Beatty

PetrofacEurope

2008 2009 2010 2011 2012

Spain

Germany

Austria

France

Italy

SwedenNetherlands

Greece

U.K.

23

Fig. 6. CSR disclosure levels per annum by US ICCs (2008–2012) 491

492

Q3: Are there more ICCs reporting their CSR performance in accordance with the GRI 493

reporting guidelines and using third-party assurance to enhance the credibility of the disclosed 494

information? 495

Table 8 shows that ICCs are increasingly reporting their CSR strategies and performance in 496

accordance with the GRI Sustainability Reporting Guidelines. Usually, companies state 497

explicitly their compliance with GRI guidelines in their reports, e.g. “the ACS Group’s Corporate 498

Responsibility Report is prepared according to the GRI’s A+ standard and is verified annually”. 499

The reports published in 2012 largely follow the G3.1 Guidelines. Some companies (e.g. 500

Hochtief AG) have followed the CRESS recently published by the GRI. Standardization of CSR 501

reporting is seen as particularly necessary by the GRI, which aims to develop a reporting system 502

framework to provide metrics and methods for measuring and reporting sustainability-related 503

impacts and performance. The emergence of the guidelines provides a useful tool for ICCs to 504

organize the contents of their CSR reporting. By providing the indicative aspects of CSR 505

reporting, they can even impact the CSR strategies a company may adopt, although currently 506

there is no evidence to support this assumption. While it is observed that ICCs’ CSR disclosures 507

are converging to the GRI and its guidelines, it is found out that companies also frequently 508

reported their own CSR commitment in aspects such as work-life balance, and information 509

transparency, which have not been clearly included in the guidelines. In part, this is because CSR 510

is not specifically embodied in company law, although there is a requirement for disclosure of 511

certain CSR activities, hence ICC disclosure is based on company priorities. There has been 512

debate about the inclusion of CSR in company law as it would help to clarify the purposes of a 513

company: profit-making and social responsibility. However, a different viewpoint is that the 514

inclusion of CSR in company law would endanger the for-profit nature of corporations. 515

0 20 40 60 80 100 120

Bechtel

Flour

PCL

KBR

CB&I

Kiewit

McDermott

Foster…

U.S.A.

2008 2009 2010 2011 2012

24

Table 8. The numbers of total CSR reports, those following the GRI standard, and those 516

using third-party assurance 517

2008 2009 2010 2011 2012

Total No. of reports 20 25 30 33 47

No. of reports in accordance with

the GRI reporting guidelines 14 19 21 24 27

No. of reports using third-party

assurance 6 7 10 12 13

518

Another interesting finding is that the ICCs are increasingly including third-party assurance in 519

their CSR reports to enhance the credibility of the disclosed information. GRI external assurance 520

normally assesses a report in terms of its application levels, and does not provide an opinion on 521

the sustainability performance of the reporter nor the quality of the information in the report. For 522

example, the ACS Group used KPMG to perform a limited assurance review on the non-financial 523

information contained in its CSR reports. While it has been common practice for financial 524

information to be verified through internal and external audits by an independent auditor, 525

verification of CSR information is relatively new in the international construction business. This 526

resonates with Jenkins and Yakovleva’s (2006) finding that there has been a gradual increase in 527

levels of assurance in the mining industry, but even where assurance exists, it usually audits 528

quantifiable environmental and health and safety indicators, while avoiding the more complex 529

qualitative social measures. 530

531

Q4: What are the idiosyncrasies in CSR reporting impacted by cultural and institutional 532

difference? 533

The pattern of performance indicators is further examined by linking it to ICCs’ 534

cultural/institutional profiles. Interesting research findings are discovered. As can be seen from 535

Table 9, Japanese ICCs particularly emphasize the importance of ‘work-life balance’ (LA4) in 536

their CSR disclosure. Obayashi prefers to promote work-life balance by reducing overall work 537

time, acquiring a certification from the Japanese government and promoting the healthy minds 538

and bodies of employees and their families. This is attributable to the profound influence of 539

Confucianism. Lu et al. (2009) reported that Confucianism shaped the foundation of social values, 540

which admire loyalty, obedience, hardworking, modesty, and so on, in not only China but also 541

other East Asian countries. Under this culture background, hardworking is widely accepted as 542

the norm across a swathe of business sectors, particularly in construction. The hardworking 543

25

culture, however, has evolved into a certain stage that ‘work-life balance’ should be upheld. 544

Interestingly, ‘work-life balance’ has not frequently mentioned by Chinese or Korean ICCs (see 545

Table 9). The temptation is to further examine it by connecting it to the construction productivity 546

in different countries. Similarly, within Europe, a Greek registered company will have different 547

values to a Swedish company. ‘Code of conducts/ethics’ (SO2) is most frequently reported by 548

ICCs from Western European countries such as UK, Germany, Spain, and Italy. All the seven 549

Spanish companies, the three Italian companies, and the two UK companies disclosed the ‘Code 550

of conduct/ethics’ in the investigated years. It is generally considered that these countries have a 551

relatively high ethical standard as a guide for the professional practices especially in ethical, 552

social and environmental matters. The standard must not be lessened when they conduct 553

construction business in host countries. A characteristic of ICCs is that they are domiciled and 554

registered in their home country with a regulatory and social framework that must be complied 555

with, they are also working in countries with very different regulatory and social requirements. 556

When they publish CSR reports, their audience is the shareholders, customers, and society in 557

their home domicile, and customers and society in the other countries in which they operate. 558

Contrasting operational standards of the USA with Indonesia are very different, yet cannot be 559

ignored. ‘Market presence’ (EI2), which includes procedures for local hiring for all direct 560

employees from contractors and sub-contractors (CRESS 2014), is also an indicator that is 561

particularly disclosed by EU countries’ ICCs. They are strong in construction ‘know-how’ and 562

do not have a large group of directly hired workers. They also source their construction materials 563

and machinery on a global scale. These provide an opportunity for the ICCs to achieve CSR 564

excellence throughout their global logistics and supply chain. Notably, for unknown reason, the 565

American ICCs are not particularly remarkable in disclosing their commitment in either ‘Code 566

of conduct/ethics’ or ‘Market presence’. 567

568

Table 9. Analyses of unique CSR disclosure by countries/regions 569

Indicator Countries/Re

gions

No. of

Companies a

No. of

Reports a

Disclosure

Levels a Proportion

LA4 Work-life

balance

Japan 3 13 12 92.31%

China 6 18 7 38.89%

S. Korea 8 21 8 38.10%

SO2 Code of

Conduct/Ethics

Europe b 15 49 47 95.92%

U.S.A. 9 20 14 70.00%

EI2 Market

Presence

Europe b 15 49 46 93.88%

U.S.A. 9 20 14 70.00%

26

a. Number of companies, Number of Reports and Disclosure Levels include the data of 5 years from 570 2008 to 2012 inclusive; 571 b. Four countries’ companies (Spain, France, Italy, and UK) are included in the group of “Europe”. 572 573

Other interesting idiosyncrasies in CSR reporting impacted by cultural and institutional 574

difference have been discovered. For example, the oxymoron of CSR might be doubled when it 575

comes to China, as CSR is perceived as volunteering in many cultures while in China assuming 576

CSR is regulated by Article 5 in its Company Law revised in 2005. In the UK, anti-corruption 577

actions are particularly promoted. Balfour Beatty is the corporate supporter of TI, the Institute 578

of Business Ethics and the UK Anti-Corruption Forum by working with all three organizations 579

to help develop and share best practice and promote the objectives. One notable trend is that 580

ICCs would not adopt ‘one-size-fit-all’ CSR strategies; rather, they devise tailor-made CSR 581

strategies to possibly shorten the cultural/institutional distance between home and host countries. 582

Differences in philanthropical activities result mainly from the differences in the regions in which 583

ICCs operate and the prevailing social welfare policies and cultural norms of the regions. Usually, 584

ICCs aim to gear the social commitment toward the needs of the society. For example, Hochtief 585

Asia Pacific is highly involved in working for the rights of Indigenous Australians; its Americas 586

division undertakes a variety of measures to help ethnic minorities and the Europe division 587

supports talented young people from a migrant background. There are other examples that ICCs 588

would have different CSR strategies due to different culture of host countries. Balfour Beatty, 589

for example, is a lead sponsor for the London Youth Games, which works with some of the most 590

disadvantaged young people in London, while in Philadelphia, they have been funding a 591

mathematics programme for children of destitute families to help them keep pace with more 592

fortunate social groups in the race for high school and college places; in South Africa, they give 593

financial and practical support to the Compass Care Centre in Edenvale which provides food and 594

shelter to poor, homeless, and unemployed mothers and their children. CSR, in a sense, has been 595

employed by ICCs as a ‘soft power’ when undertaking their international construction business. 596

ICCs adopt CSR strategies that are mostly desired by host countries in line with their cultural 597

and institutional difference. 598

599

Q5: What are the possible prospects of CSR disclosures by ICCs? 600

Based on the above analyses of the trends of CSR disclosures, it can be reasonably expected that 601

the number of companies disclosing their CSR performance using CSR/SD reports will increase 602

in the future. ICCs from developed countries will continue to maintain a high level of CSR 603

27

disclosure. The average disclosure level of Asian and Australian ICCs shows a dramatic rise in 604

the past years to an extent that is similar to Europe’s ICCs. In line with the trend that ICCs from 605

developing countries increasingly become an emerging force in built environment provision in 606

the international arena, they will also join in this CSR cause, either self-consciously or forcedly 607

by external pressure. This echoes with Porter and Kramer (2006) that CSR has emerged as “an 608

inescapable priority for business leaders in every country”. ICCs view CSR reporting an effective 609

way of interacting with society and influencing external perceptions of their organizations. The 610

idea that all organizations should realize and discharge their social responsibility for sustainable 611

development of society, a concept demonstrated by ISO 26000, has spread around the world. 612

613

Theorists suggested that there is a ‘social contract’ between companies and society, bound by 614

which companies agree to perform various socially desired actions in return for societal approval 615

of their objectives and other rewards. Whilst the ‘social contract’ is gradually accepted as the 616

rationale behind CSR disclosure, ICCs are still struggling with what should be entailed in it. This 617

is further exacerbated by the absence of a single and agreed definition of CSR. Increasingly, 618

ICCs adopt the GRI as the guidelines of their CSR disclosure and this is expected to be the 619

prospect in the future. Although standardization of CSR disclosure is advocated, diversity of 620

CSR disclosure contents will continue and should be allowed. The diversity lies in the cultural 621

and institutional distance between the home and host countries, a particular issue that ICCs must 622

deal with when they undertake the international construction business by using CSR as a ‘soft 623

power’. There are some items that have been frequently disclosed by ICCs but have not been 624

included in CRESS. It would be a reasonable move for the GRI to expand their guideline to 625

include the items in the future. 626

627

Third-party assurance is expected to continue in ICCs’ CSR reporting to enhance the credibility 628

of the disclosed information. Nevertheless, verification of CSR information, which is largely 629

non-financial in nature, will remain as a challenge in CSR reporting in the international 630

construction business. How to quantify and report CSR information consistently to allow society 631

to monitor it longitudinally is a challenge to not only the third-party auditors, but also the ICCs 632

which perceive CSR reporting as an effective way of communication. This was also echoed by 633

McKinsey (2011) that the challenge for CSR reporting is the measurement of tangible outcomes 634

and explaining the integration of external engagement. 635

636

28

Conclusions 637

This research explored the trends and prospects of CSR disclosure in the international 638

construction businesses. Analysis of the CSR/sustainability reports over a period of five years 639

(2008-2012) of the 50 top international construction companies (ICCs) ranked by Engineering 640

News-Record showed that there is increasing CSR disclosure. ICCs are enriching the contents of 641

their CSR disclosure reports, viewing this an effective way of interacting with society and 642

influencing external perceptions of their organizations. ‘Emissions, effluents and waste’, 643

‘Community’, and ‘Occupational health and safety’, are the three most frequently reported CSR 644

indicators. This largely confirmed legitimacy theory and stakeholder theory, which imply that 645

higher levels of CSR disclosure occur concurrently with increased focus on the potential 646

problems a company may cause, or increased threat of litigation or fines. Nevertheless, there 647

have been fewer disclosures in sensitive aspects such as anti-corruption, anti-competitive 648

behavior, and intra-corporate information transparency. These are the aspects that ICCs can 649

perform better and should have more disclosure. 650

651

This research further discovered that ICCs from the more economically developed countries 652

maintain a high level of CSR disclosure, while ICCs from the less economically developed 653

countries are beginning to adopt this practice. Emerging from the both sides of the Atlantic, CSR 654

has travelled to the world with the internationalization of construction business; so have CSR 655

disclosure practices. The research found that ICCs increasingly report their CSR strategies in 656

accordance with the GRI reporting guidelines, although there is no way to identify whether this 657

compliance is effective or not. Increasingly, ICCs are using third-party auditors in their CSR 658

reports to ensure the credibility of the disclosed information. While CSR disclosures by ICCs 659

present a higher degree of uniformity, they also show nuanced and intriguing diversity in their 660

CSR reporting. ICCs from EU highlighted their compliance of code of conducts/ethics, and their 661

‘Market presence’ which means achieve CSR excellence throughout their global logistics and 662

supply chain of construction business resources. East Asian ICCs are promoting work-life 663

balance while inherently they uphold a merit of ‘hard working’ in their value system. 664

665

By providing an international and paradoxical lens through which CSR issues can be investigated, 666

the research contributes to the relevant body of knowledge by helping confirm or refute various 667

theoretical perspectives on CSR disclosure in international construction. The insights offered by 668

this research will allow ICCs to consider the contents that a CSR disclosure report should include. 669

29

For scholars interested in CSR, the approaches used to measure the extent and levels of disclosure 670

are useful references. The limitations to this paper are: firstly, the analysis was based solely on 671

one type of communication – CSR reports published on websites. Some CSR reports could not 672

be found despite our best efforts. Secondly, the longitudinal study’s five-year time frame may 673

not be long enough for the emergence of meaningful trends. Third, the CSR reporting practices 674

of only the top 50 large ICCs might not be representative of the international construction 675

business in general, because smaller international companies have not been included in the study. 676

677

Acknowledgement 678

The work is supported by the Hong Kong Research Grants Council (RGC) General Research 679

Fund (GRF) (Project No.: HKU 749312B). 680

681

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